The Minister in Portugal ( Dearing ) to the Acting Secretary of State

No. 2976

Sir: With reference to the Department’s telegraphic instruction No. 8 of February 5, 5 [3] P.M., regarding the alleged plan to establish an oil monopoly in Portugal, and to my telegraphic reply thereto, No. 14 of February 8, 11 A.M.,4 I have the honor to report that, shortly after the receipt of the Department’s instruction to which I refer, Messrs. Sellers and James, of the Vacuum Oil Company, called upon me and stated that there was reason to believe no final action in the matter had yet been taken despite the information obtained from the Ministry for Foreign Affairs by the British Ambassador, through one of the Secretaries, to the effect that an extension of time had been granted to those holding the threatening concession. I acquainted Messrs. Sellers and James with the nature of my instructions and told them that I would immediately call upon the Minister of Commerce and the Minister for Foreign Affairs in order to make oral representations to them in the sense of the said instructions. About an hour after they had left the Legation Mr. Sellers telephoned that he had learned that the extension of time had not been granted to the concessionaires and that he had reason to believe that the question at issue remained open.

I reached the Ministry of Commerce at about half past twelve and was very kindly received by Dr. Joao Antunes Guimaraes, the Minister. I explained that I had sought an interview with him in connection with the oil refining monopoly as I understood that the time limit for the extension of the monopolistic concession had expired on the previous day, that my instructions were urgent and that I had been unable to make an appointment to see the Minister for Foreign Affairs during the course of the morning. In consequence, I had sought an immediate interview with the Minister. I further explained that it had been reported to me that the Legation was engaged in intervening actively on behalf of the Atlantic Refining Company and that this was interpreted as inimical to the interests of the Vacuum Oil Company, particularly inasmuch as, in the absence of positive representations on behalf of the Vacuum Oil Company, it was being said that the latter lacked the support of the Legation. It was my desire, I said, to expose the falsity of these rumors and to make it clear that the Legation was prepared at all times to protect all American interests without favor or favoritism toward one American company as against another. I pointed out, however, that the present [Page 775] concession belonged to what is still a Portuguese company, that free and open competition was a traditional principle of our Government and that we would regret to see monopolies created in Portugal inasmuch as the result thereof would be injury to American interests established in good faith and maintained throughout a long series of years. The Minister replied that he understood perfectly this attitude, that to grant the petition of the concessionnaires for an extension of time would be practically tantamount to granting them a new concession, that no extension had been granted, that the matter was still open and that, while it had been before him for some months, he desired to study it longer and to go into it more thoroughly. Thereupon, he showed me a voluminous file on his desk, saying that it was composed of the papers in the case. On top, there was a letter from the Vacuum Oil Company. The Minister then went on to say that the Portuguese Government saw in the concession the possibility of forcing foreign oil companies to sell at reasonable prices and that it was felt that gasoline in Portugal was far too dear in consequence of the good understanding existing between some of the companies—evidently meaning the Shell and the Vacuum Oil Company. In reply, I ventured the opinion that the high price of gasoline in Portugal was the result of customs duties and other charges. With regard to the use of the concession for the purpose of bringing about price reductions, I demurred, saying that I felt that this could be accomplished better in other ways and that, in any event, my impression was that the price levels in question conformed very closely to the governing economic laws and that in fact they were probably relatively as low as those of any other commodities. The Minister took this in very good part and again intimated that he would study the matter further in order to determine what would be best in the interest of the Portuguese people, national economy and governmental policy. I asked the Minister kindly to let me know when he had reached his decision. This he promised to do through the Ministry for Foreign Affairs. Finally, I informed the Minister that I would explain why I had come directly to him when I saw the Minister for Foreign Affairs during the course of the afternoon.

Upon leaving the Ministry of Commerce, I went to see Mr. Sellers and gave him the gist of my interview with the Minister. Mr. Sellers said that he had already supplied Dr. Salazar, Minister of Finance, with full details regarding the manner in which the price of gasoline sold by the Vacuum Oil Company was determined and that he was quite prepared to go to the Minister of Commerce in order to remove any existing misconception with regard to price levels and to see that Dr. Salazar had all the facts and data. After saying that he might supply the Minister of Commerce with a copy of his letter to the Minister of Finance, he said that upon reconsideration he would [Page 776] not care to run the risk of allowing the Shell Company to obtain the Vacuum Company’s figures.

About 4–30 in the afternoon I called upon the Minister for Foreign Affairs, to whom I repeated in substance that which I had said to the Minister of Commerce. Captain Branco was very cordial and said that he was glad I had taken up the matter directly with his colleague.

Shortly afterwards I went to see the British Ambassador. Sir Francis said that he had already taken occasion to say to Mr. Sampayo, the permanent Director General and real head of the Ministry for Foreign Affairs, that to grant a monopolistic concession would be injurious to British trade. On being asked whether this was the only ground upon which he had made representations as yet, Sir Francis answered that it was. He added that he had talked the matter over with Mr. Shervington of the Shell Company and that he was referring the case to the Foreign Office in London with a request for instructions. Mr. Shervington had told him that at various times during the past twenty years the original concessionnaires had endeavored to dispose of the concession both to the Vacuum Company and to the Shell Company, but that neither of these companies had been interested as the Portuguese Government had refused to guarantee that the import duty on crude oil would not be increased. This feature of the concession rendered it one of very questionable value, especially in a country having disturbed political conditions. Sir Francis was of the opinion that the Standard and Shell groups could prevent the Atlantic Refining Company from obtaining crude oil in most of the usual markets. To this I replied that it had been mentioned to me that the necessary supplies might be obtained from Russia.

This morning, Mr. Sellers called again, giving me a copy of a letter to the Minister of Commerce of February 6, explaining the manner in which the Vacuum Oil Company determined the price of gasoline. He also supplied me with a confidential memorandum on the subject, saying that, while he did not wish to leave it with the Minister, he was quite prepared to call upon him and to offer verbal explanations. He also said that he knew that Sir Francis Lindley had already cabled to London for instructions. Mr. Sellers added that he had heard from the Minister of Commerce in an encouraging sense and that he had received equally good news in respect of Dr. Salazar, who seemed disinclined to grant a concession or an extension of time in view of the attendant loss to the treasury of the large revenue now being obtained from the customs duty on gasoline.

I expect to have occasion shortly to report further in respect of the British attitude in the matter, as Sir Francis Lindley has promised to keep me fully informed. Meanwhile, it would seem as though definite action in the case would be deferred for the time being and that during [Page 777] this interval the Vacuum Oil Company would have an opportunity fully to present its side of the case and to obtain a hearing for its arguments.

I have [etc.]

Fred Morris Dearing
  1. Latter not printed.